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Trump's tariff chaos drives record $21 bln in US apparel

and

footwear M&A

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Companies merge or go private to offset tariff costs,

dealmakers

say

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Brand management firms actively acquiring retail brands

By Abigail Summerville

Sept 18 - U.S. President Donald Trump's trade war is

helping to push U.S. clothing and footwear acquisitions to

all-time highs this year, with some companies merging to help

offset tariff costs while others go private to weather the next

3-1/2 years of his presidency outside of the public market,

dealmakers say.

Popular sneaker company Skechers announced a $9.42 billion deal

in early May to go private days after it pulled its annual

earnings forecasts and sent a letter, along with 75 other

footwear companies, telling Trump the tariffs were an

"existential threat" to the industry.

Sneaker seller Foot Locker, which also signed the letter to

Trump, in May accelerated its

$2.4 billion sale

to Dick's Sporting Goods.

While both deals were in the works for months, bankers and

analysts said Trump's tariffs are creating both chaos and

opportunity for retailers and brands for some tie-ups.

It has driven dealmaking in the U.S. footwear and apparel

sectors to roughly $21 billion in deals announced year-to-date.

With more than three months left in the year, that figure

is already a record, according to LSEG data dating to the 1970s,

and particularly surprising for an industry where valuations are

not nearly as lofty as, say tech or financial services.

The previous record for U.S. apparel and footwear M&A was last

year's $16.1 billion in deals, and before that, 2021 with $15.6

billion, according to LSEG.

"Scale is more important in a tariff-rich environment because

you can negotiate better terms across a larger base with many of

your counterparties," said Carmen Molinos, Morgan Stanley's ( MS )

global co-head of consumer retail investment banking.

Morgan Stanley ( MS ) advised Canadian apparel maker Gildan Activewear ( GIL )

on its deal last month to buy U.S. underwear maker

Hanesbrands ( HBI ) for $2.2 billion.

Both companies produce more in Central America and the

Caribbean than in Asia, and mostly use U.S.-grown cotton, giving

them some protection from tariffs. The combination insulates

them more from fluctuating geopolitics, and Gildan was one

company looking to get bigger amid the chaos.

"We think that we're really well aligned to take advantage,

actually, of this near-shoring opportunity," Gildan's CEO and

co-founder Glenn Chamandy said on an August investor call about

the deal.

Tariffs were a shock to the system that showed retailers just

how quickly their businesses can get disrupted and highlighted

the importance of scale, several bankers said.

"In moments of turmoil and change, those who are in a

position of strength are looking to build up on those strengths

and if they see the right strategic fit, they're taking

advantage (and buying)," said JPMorgan's ( JPM ) Jonathan Dunlop,

co-head of North America consumer & retail investment banking.

This year, JPMorgan ( JPM ) advised 3G Capital for Skechers and

brand management firm Authentic Brand Group's $1.4

billion deal last month for Guess.

Authentic also picked up Dockers from Levi Strauss,

while another brand management firm Bluestar Alliance announced

a deal to buy Dickies from VF Corp ( VFC ) this week.

Brand management firms typically buy a brand's IP and then

license it to operating partners that have the manufacturing,

design and sales responsibilities.

"The brand management companies have been some of the most

prolific acquirers of both middle market and a handful of

multi-billion dollar retail brands," said David Shiffman,

partner and head of Consumer Retail at Solomon Partners. The

bank advised the special committee of Guess.

NAVIGATING THE UNCERTAINTY

Going private, like in Skechers' case, is becoming an

increasingly attractive option to navigate the uncertainty

without the pressure of public quarterly reporting, especially

if companies feel the public market is not valuing them

appropriately.

Foot Locker, meanwhile, had been in discussions about a sale

since Dick's Executive Chairman Edward Stack first reached out

to rival CEO Mary Dillon in January 2024.

Trump's April 2 self-styled "Liberation Day," when he announced

sweeping new global tariffs, helped seal the deal a bit earlier

than expected, according to an SEC filing.

Foot Locker said tariffs were causing the company's stock to

drop and it was headed for a weaker-than-expected first-quarter

earnings report that executives worried would further drive down

its shares.

The board decided on May 10 to try to bring "negotiations to

a close quickly," it said in a securities filing. The next four

days were a flurry of paperwork and legal meetings before the

companies announced their deal - with two weeks to spare before

reporting earnings.

Bankers say to watch for more tie-ups later this year as

stronger retailers look for more deals and more struggling

companies look for partners.

Private equity firm Bain Capital is trying to

offload

its stake in Canada Goose and Lands' End ( LE )

has

received offers

from brand management firms.